PENN Entertainment trims interactive segment with redundancies
CEO Jay Snowden explained that the layoffs were necessary if the company is to take full advantage of its "next phase of growth"
PENN Entertainment has made a number of staff redundant within its interactive segment ahead of the operator’s Q2 results next month.
An internal letter signed by CEO Jay Snowden and seen by EGR, released on Wednesday, July 17, reveals that a “limited number” of employees believed to be working within the firm’s sports betting and online casino segment have been let go.
“This week, we are implementing changes at PENN Interactive to help streamline reporting lines, enhance operational efficiencies, and leverage shared resources across PENN,” Snowden wrote.
“Unfortunately, these changes will result in a limited number of team member separations. While it is difficult to see colleagues impacted, we deeply appreciate their contributions and are committed to supporting them through the transition.
He continued by referencing the $2bn acquisition of theScore in October 2021 as a factor in the decision to restructure, adding: “As you know, when PENN acquired theScore, we hit the ground running with the build-out of our proprietary tech stack and the migration of our sportsbook to theScore’s best-in-class platform.
“This led us to temporarily set aside any potential organizational changes that would typically follow a major acquisition.”
Snowden went on to cite PENN’s “new phase of growth” as a reason behind the redundancies, as he remarked: “While we recognize that change is never easy, these evolutions will enable us to better capitalize upon our new phase of growth.
“Our Interactive business, which is a core pillar of PENN Entertainment, is well-positioned, and we continue to add capabilities and key talent to advance our digital growth strategy. This includes building upon the momentum of our partnership with ESPN with upcoming product enhancements and a deeper integration into the ESPN ecosystem.”
Many will not view the reduction in headcount as much of a surprise given PENN’s recent woes, with the company’s Q1 2024 results showing a 4% year-on-year (YOY) revenue decline, down to $1.6bn.
It was a similar story in terms of adjusted EBITDA, which decreased 69.5% YOY to $101.4m. The underperformance in both metrics was attributed to the interactive segment’s underwhelming return.
Last month also saw disgruntled shareholders write a letter of their own targeting CEO Snowden for the mismanagement of the company’s online sports betting efforts.
William Wyatt, managing director of activist investor The Donerail Group, insisted that the criticism levelled at PENN for its capital allocation was understandable, given he believes it has seen shareholder value deteriorate as a result.
A significant turnaround in fortune was expected when PENN ditched the Barstool Sports brand in favor of ESPN Bet, but Q2 2024 data from JMP Securities suggests the brand has a market share of just 2.7% in the US.
PENN secured a $1.5bn licensing deal with ESPN owner Disney last summer as it shifted track and sold Barstool Sports back to its founder Dave Portnoy for just $1. The brand remains well behind the duopoly of FanDuel and DraftKings in the US.
Towards the tail-end of last month, speculation surrounding Boyd Gaming’s plan to launch an acquisition approach boosted PENN’s share price by 10%.